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Secretary of State Madeleine K. Albright
Opening Remarks on China MFN before the Senate Finance Committee
Washington, D.C., July 9, 1998
As released by the Office of the Spokesman
U.S. Department of State

As Prepared for Delivery

Chairman Roth and Members of the Committee, it is always a pleasure to appear before you, as I did just three weeks ago in support of the African Growth and Opportunity Act. I am grateful to be invited back so soon to testify, along with my colleague Charlene Barshefsky, on another matter of great importance to American leadership and prosperity.

The question of whether to continue most favored nation, or normal, trade relations with China has been debated exhaustively and repeatedly in recent years. Each year, the balance of opinion has been to support its extension. The case for doing so now is stronger than ever.

For today, we face a financial crisis in Asia whose repercussions continue to deepen and spread. And the President's recent trip has underscored the major role that U.S.-China relations will play in determining future stability, prosperity and peace across Asia and around the world.

There is no greater opportunity -- or challenge -- for U.S. foreign policy than to encourage China's integration as a fully responsible member of the international system. Maintaining normal trade relations reflects our commitment to this goal.

Obviously, continuing MFN does not mean we see eye to eye with the Chinese Government on every issue. As the President made clear in remarks directly addressed to and received by the Chinese people, we continue to have sharp differences on human rights and other issues.

The question we face is how to deal with these issues in the way most likely to promote progress. The Administration believes the answer is to engage directly and frankly with the Chinese, making clear our values and motives, pressing our views vigorously but with respect for the Chinese nation.

Let me be clear, Mr. Chairman, our policy toward China is not based on rosy assumptions about how Chinese policies will evolve. But we believe there are many areas where U.S. and Chinese interests overlap, and that these provide a basis for increasing cooperation between our countries. And a basis for hope that the choices China makes will increasingly be the right ones.

Certainly, having spent a good deal of time with the Chinese people in recent days, I am persuaded that many of their fundamental aspirations mirror our own. Whether you live in San Francisco or Shanghai, you want to be part of a healthy and growing economy; you want to be secure from the proliferation of nuclear weapons and poison gas; you want the air to be clean and the water safe to drink; you want the authorities and the people alike to respect the rule of law; and you want to have a say in the decisions that affect your life.

Today, in the People's Republic of China, a remarkable process of change is under way. Clearly, that process has far to go, but the evidence suggests it has started down the right road.

Certainly, America's interests in Asia will be heavily influenced by China's own perceptions of its national interests and by the policies it adopts to advance them. By engaging President Jiang and other Chinese leaders in a strategic dialogue, President Clinton is doing precisely what a President of the United States should be doing. He is seeking to improve prospects for a secure, stable and prosperous Asia, while articulating American support for universal principles of freedom and human rights.

This approach is paying off, not through spectacular overnight gains, but through steady progress in a variety of areas.

The control of deadly arms is a solid example. As a result of our strategic dialogue, the People's Republic of China is increasingly moving from being part of the proliferation problem to being part of the solution.

During the past few years, China has joined the Nuclear Non-Proliferation Treaty and supported its indefinite extension; ceased testing its nuclear weapons and signed the Comprehensive Test Ban Treaty; became an original party to the Chemical Weapons Convention; agreed not to assist any unsafeguarded nuclear facilities, and to cut off all nuclear cooperation with Iran; and adopted comprehensive controls on nuclear and dual-use exports.

In recent weeks, China has played a significant and helpful role in trying to move India and Pakistan back from the brink of a nuclear arms race.

And the summit brought further progress. In Beijing, we reached agreement with the Chinese not to target one another with nuclear missiles -- a step which reduces the risks of an accidental launch. And the Chinese agreed to actively study membership in the Missile Technology Control Regime.

Regional security is another matter on which U.S. dialogue with Beijing has enhanced cooperation and fostered progress. For example, the People's Republic of China has consistently supported the Agreed Framework that has frozen North Korea’s dangerous nuclear weapons program, and has urged the North to continue complying with it. And the PRC is cooperating with us in the Four-Party Talks that seek to bring lasting peace to the Korean Peninsula.

It would harm America's national security interests, Mr. Chairman, to jeopardize this cooperation by suddenly terminating normal trade relations. Needless to say, it would harm our economic interests as well.

Last year our direct goods exports to China totaled almost $13 billion -- up nearly 400 percent over the past decade. And we exported $15 billion more to Hong Kong, much of it destined for the China market. Taken together, our sales to China and Hong Kong support some 400,000 U.S. jobs that pay on the average 13 percent more than non-export related jobs. Revoking MFN would invite retaliation and put these good American jobs and incomes directly at risk.

Moreover, such a decision would lessen the purchasing power of every American paycheck. For even assuming changed trade flows, it would force American consumers to pay more for goods subject to increased tariffs. And that, in turn, would add to inflationary pressures in our economy.

MFN revocation could come back to haunt us even more substantially by destabilizing currency markets in the Asia-Pacific. China has played a constructive role in promoting financial stability in the region, through direct assistance, multilateral cooperation, and participation in international financial institutions.

MFN revocation would set back China's own daunting program of market reforms and thus make it hard for China to maintain its contribution to Asian stability. And restricting Chinese exports to the U.S. might well cause China to devalue -- with potentially dire consequences for its neighbors, for China's own stability, and for markets worldwide, including our own.

One certain victim of MFN withdrawal would be Hong Kong. That port handles almost 50 percent of U.S.-China trade, so it's highly dependent on normal relations. And while the reversion of authority to China for the most part has gone smoothly, Hong Kong has not been immune from the effects of the Asian economic crisis.

Hong Kong authorities estimate that losing MFN would reduce its trade by up to $34 billion and its income by $4.5 billion. Any retaliation by China would amplify this damage.

That is why Hong Kong officials -- including democratic leader Martin Lee -- are united in support of MFN renewal. Now, only a year after reversion, is no time to sabotage Hong Kong's economy, ignore its wishes, undermine its confidence and weaken its autonomy by revoking MFN.

Mr. Chairman, I will be frank in saying that, although our economic ties with China have grown, the size of our trade deficit is deeply troubling. It's too big; it's moving in the wrong direction; and it cannot keep growing indefinitely.

The deficit reflects, in part, our ongoing differences with China over market access issues. We want more open markets; they have been slow to respond.

No fully satisfactory outcome can be achieved until China agrees to a commercially viable package of terms for joining the World Trade Organization. That hasn't happened yet, and while Charlene Barshefsky and our other negotiators have made some progress, the Chinese have not moved far enough. This is a tough nut and we're working hard to crack it. I believe, with the President, that we'll eventually get it done, because in the end it's very important to the Chinese, to us and to the world that China come in to the WTO on clear, strong and commercially viable terms.

One thing is already clear, however. Revoking MFN is not the way to open up China's market. On the contrary, it would squander the progress we have achieved. And it would give a huge edge to our major competitors in Europe and Asia, all of whom have normal trade relations with China.

The U.S.-China dialogue also extends to the environment and other global issues. This is important because China's demand for energy will more than double in the next decade. It is already the second-largest emitter of greenhouse gases, the leading producer of ozone-depleting substances, and home to five of the world's ten most polluted cities. Clearly, China is a key to addressing global environmental problems.

That is why we were encouraged by Beijing's decision last year to eliminate the use of leaded gas. And that is why we're now increasing our cooperation on clean energy using American technology, working with the Chinese on a nationwide air quality monitoring network, and helping them find ways to finance economic growth without wasteful energy habits.

China's leaders now understand how important this is. By the year 2000, they plan to almost double the percentage of their nation's GDP devoted to environmental spending. Since the United States is the world's leader in environmental technology, it is both smart and right for us to work with China on behalf of a healthy global environment. Revoking normal trade status would close off these business opportunities and cripple our efforts to enlist China's support.

With regard to Taiwan and the aspirations and interests of its people, I am convinced that both our dialogue with Beijing and the President's trip will have a positive impact. This is because a People's Republic of China that is hostile and suspicious of outside influences would be more, not less difficult for Taiwan to deal with. And a PRC that continues to be drawn into the international community –- as it was by the President's trip, and as it would be by renewal of normal trading status –- is one whose interests and identity will be more, not less consonant with those of Taiwan. In light of these truths, and Taiwan's burgeoning trade and investment with the PRC, renewal of MFN is in Taiwan's interest.

Obviously, Mr. Chairman, we remain very dissatisfied with the state of human rights and religious freedom in China. As I have said many times, engagement is not endorsement.

But we also note that Wang Dan, Wei Jingsheng, and other prominent political prisoners have been released on medical parole or otherwise permitted to leave. China has signed the UN Covenant on Economic and Social Rights, and has announced it will sign the UN Covenant on Civil and Political Rights in the fall. Chinese officials have hosted visits by a delegation of U.S. religious leaders, as well as the UN Working Group on Arbitrary Detention. And the Chinese have substantially expanded their cooperation with us on the rule of law.

During the summit, President Clinton spoke out more openly and forcefully about human rights in China than any foreign leader has ever done in that country. And he did so not in one isolated instance, but in a series of very public appearances. The President's trip exposed hundreds of millions of Chinese to America's conviction that human rights are universal -- and that human freedom is indispensable to any country's effort to compete in the world economy.

The summit turned the international spotlight on the issue of religious freedom as well. The President spoke at the largest Protestant Church in Beijing. In Shanghai, I had a fascinating discussion about government regulation of religion with Protestant, Catholic, Muslim, Taoist and Buddhist clergy. Here and around the world, prominent religious leaders have hailed the trip. The Philippines’ Cardinal Jaime Sin, for example, told our Ambassador in Manila that he believed the trip could prove to be a turning point for religion in China.

President Clinton also made protection of Tibet's unique religious, cultural and linguistic heritage a high priority. In his joint press conference in Beijing, he suggested face-to-face talks between President Jiang and the Dalai Lama. President Jiang responded in a more open manner than he had in the past. And the Dalai Lama applauded both President Jiang's reaction and the President’s support, which he said "can be enormously helpful."

Mr. Chairman, I have been a student of change in communist societies all my life, and I truly believe China has begun to change. Once the door opens to the kind of honest public debate about history and politics that the Chinese people began to experience two weeks ago, it becomes very hard for any government to seal it shut again. Once people see the power of the mass media to improve their lives by providing information and exposing wrongdoing, it becomes very hard to close their eyes again. And once people understand that another, freer way of life really is possible -- that it exists elsewhere and that it works -- it becomes very hard to deny it to them forever.

It would be arrogant to suggest that our engagement alone can give rise to democracy in China; only the Chinese people can achieve that. But engagement can contribute to an environment in which the Chinese people have more access to information, more contact with the democratic world, and less resistance from their government to outside influences and ideas.

Cutting off U.S. engagement would do nothing to encourage the forces of change in China. It would not free a single prisoner, open a single church, or expose a single Chinese citizen to a new idea. It might make some people feel good, but it would not advance either our interests or our principles.

That would not be a productive approach. Nor would it reflect why so many of those who are fighting for greater freedom in China support renewal of MFN.

Mr. Chairman, MFN embodies America's commitment to open markets. As you well know, despite its name, it is the standard tariff treatment we extend to almost all nations -- including many with whom we have major disagreements. We favor low tariffs because of our fundamental belief that open trade contributes to peace and prosperity. That's one reason why, ever since the United States and China normalized relations almost two decades ago, Presidents of both parties have supported MFN for China because it serves American interests.

Revoking MFN would rupture the U.S.-China relationship and set back progress. It would place at risk our own prosperity and our stake in a stable Asia.

Extending MFN will extend our influence, fortify our strategic dialogue and make further progress more likely.

Now more than ever, the choice is clear. I urge you, Mr. Chairman, and all the Members of this Committee, to support the renewal of normal trade relations with China. That is the right vote for the United States, for the people of China, for Asia, and for the future of us all.

Thank you, Mr. Chairman. That concludes my testimony. I would be pleased to respond to your questions.